Back/spine problems are extremely common, affecting about 30% of persons over age 45. Although prevalence has remained steady for nearly three decades, rates of spinal surgery, injections, advanced imaging and physical therapy to treat back/spine disorders have increased significantly, suggesting that treatment of back/spine problems has become more resource intensive. Moreover, there is considerable geographic variation in spinal surgery, which does not appear to be justified by clinical or scientific evidence. Possible explanations include lack of clear practice guidelines, financial incentives to perform more surgery and differences in clinical training. No studies investigate whether more resource intensive treatments and higher spending, either over time or across areas, result in better patient outcomes. Given the expected growth in the number of Medicare beneficiaries and expenditures, it is critical to evaluate the efficiency of Medicare's spending for back/spine problems. This project poses two research questions. The first addresses whether financial incentives linked to physician ownership of either specialty hospitals or ambulatory surgery centers (ASCs) affect patterns of care for Medicare beneficiaries with back/spine disorders. Specifically, do Medicare back/spine patients treated by physicians with an apparent financial interest in specialty hospitals or ASCs have higher expenditures than other Medicare back/spine patients? Second, if these Medicare patients do receive more intensive treatment for their back/spine problems, do they have better health outcomes, controlling for baseline health status and other sociodemographic characteristics? The project will examine these significant policy questions using the Medicare Current Beneficiary Surveys linked to Medicare claims data spanning the years 2002- 2007. The analysis will compare Medicare beneficiaries with back/spine problems treated by three types of providers: 1) physicians with financial interests (relationships) in specialty hospitals or ASCs; 2) physicians who are employed by a hospital or health system; and 3) physicians who have no direct financial relationship with a specialty hospital or ASC. PUBLIC HEALTH RELEVANCE: The findings will provide new insights on a critical health policy issue-whether greater resource intensity is associated with improvements in health and overall functioning. The results will indicate whether financial incentives result in higher spending per beneficiary and if so, whether such expenditures represent inefficiency, where the costs exceed the benefits, or represent a health-spending tradeoff. Such information will be of significant value to government and private payers, employers and consumers who are concerned about escalating health care spending and insurance premiums. Moreover, such information will be highly relevant regarding the ongoing debate over how to control Medicare and other health care spending.